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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






2. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






3. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






4. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






5. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






6. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






7. The marginal utility from consumption of more and more of that item falls over time






8. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






9. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






10. Occurs when LRAC is constant over a variety of plant sizes






11. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






12. Exists if a producer can produce more of a good than all other producers






13. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






14. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






15. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






16. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






17. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






18. Ed = (%dQd)/(%dP). Ignore negative sign






19. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






20. The price of a good measured in units of currency






21. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






22. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






23. AFC = TFC/Q






24. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






25. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






26. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






27. Costs that change with the level of output. If output is zero - so are TVCs.






28. The practice of selling essentially the same good to different groups of consumers at different prices






29. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






30. Ei > 1






31. The ability to set the price above the perfectly competitive level






32. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






33. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






34. A firm that has market power in the factor market (a wage-setter)






35. The lost net benefit to society caused by a movement away from the competitive market equilibrium






36. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






37. Two goods are consumer substitutes if they provide essentially the same utility to consumers






38. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






39. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






40. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






41. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






42. Entry (or exit) of firms does not shift the cost curves of firms in the industry






43. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






44. The difference between total revenue and total explicit and implicit costs






45. Exists if a producer can produce a good at lower opportunity cost than all other producers






46. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






47. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






48. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






49. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






50. The additional benefit received from the consumption of the next unit of a good or service







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